You Could Pay 0% on Capital Gains in 2025
Investors and business owners get the best tax breaks!
Tech Companies Report Earnings this Week
U.S. equity futures were up on Sunday, October 27, as investors expect tech companies to lead another market rally this week.
Five companies from the Magnificent Seven will report earnings: Amazon, Apple, Google, Microsoft, and Meta.
As you know, market swings happen when large-cap tech companies gear up to report earnings. This week will be no different.
Let’s face it: we want continued confidence in AI. If these companies pull back on their AI efforts, the market will likely react negatively.
If you have investments in any of these companies—like me—you know the drill:
Short-term swing traders: monitor your positions and manage your downside risk by setting stop-losses or scaling your investment where necessary.
Long-term investors: stay invested! Time is on your side. If the share price drops lower after earnings, buy more!
Also, other essential data is expected to be released this week:
September jobs report
Price index
Third-quarter GDP numbers
This will be a busy week, so stay grounded in the investment principles.
You Could Pay 0% on Capital Gains in 2025!
Let’s break things down…
What are capital assets?
Capital assets are significant pieces of property that help generate revenue. Typically, capital assets are held for longer than one year. Examples include homes, investment properties, stocks, bonds, cars, and collectible art.
What are capital gains?
Capital gains are profits you make from selling your capital assets. For example, anytime you sell your stocks for a profit, you’ve received a “capital gain.”
How do capital gains taxes work?
When you receive a paycheck from your job, you trigger a taxable event, so you must pay taxes on that income. Similarly, when you collect capital gains, you trigger “capital gains taxes.”
Capital gains taxes are divided into short-term and long-term tax rates.
Short-term tax rates are pretty simple—they’re taxed according to ordinary income tax brackets. Your capital gains are added to your other income, and you pay taxes according to whatever tax rate you fall into.
Long-term tax rates are different, and that is where the magic happens for long-term investors. They’re calculated separately from ordinary income and often at much lower tax rates!
Here’s how it works:
Profits made on the sale of a capital asset held for longer than one year are subject to long-term capital gains taxes. These tax rates are divided into three groups: 0%, 15%, and 20%. You will never pay more than 20% (unless Kamala Harris becomes President). Your taxable income and filing status determine the percentage you will pay.
Adjustments to capital gains taxes in 2025
Single filers:
In 2025, you’ll owe 0% in capital gains taxes if your total taxable income is $48,350 or less. If you make between $48,351 and $533,400, you’ll pay only 15%. For those making $533,401 or more, your maximum capital gains tax will be 20%.
The same goes for couples who are married but filing separately.
Married filing jointly:
Those making up to $96,700 will pay 0% in capital gains taxes. Joint filers making $96,701 to $600,050 will fall in the 15% tax bracket, while those making above 600,051% will pay a maximum of 20%
Something to consider
Investors and business owners are often criticized for paying lower taxes and, in some cases, no taxes at all.
You can see how paying lower taxes is a legal right for investors and business owners, made possible—in part—by the IRS's capital gains tax rules.
Many other legal policies lower and eliminate investor and business taxes; you should not feel bad for using them!
When those critics become investors and business owners, they can use them too!
Tools and Resources
Read “Cashflow Quadrant” by Robert Kiyosaki to learn more about lowering your liabilities and tax rates as an investor or business owner.
I read this book two years ago, and it clarified the benefits of generating income through assets. I highly recommend it!